Fair Value Measurements and Investments

12 Months Ended

Jun. 28, 2019

The Company’s total cash, cash equivalents and available-for-sale securities was as follows:



	June 28, 2019		June 29, 2018
	(in millions)
Cash and cash equivalents	$	3,455	$	5,005
Short-term available-for-sale securities (included within Other current assets)	—		23
Long-term available-for-sale securities (included within Other non-current assets)	—		93
Total cash, cash equivalents and available-for-sale securities	$	3,455	$	5,121

Financial Instruments Carried at Fair Value

Financial assets and liabilities that are remeasured and reported at fair value at each reporting period are classified and disclosed in one of the following three levels:


Level 1.	Quoted prices in active markets for identical assets or liabilities.


Level 2.	Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


Level 3.	Inputs that are unobservable for the asset or liability and that are significant to the fair value of the assets or liabilities.

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 28, 2019 and June 29, 2018, and indicate the fair value hierarchy of the valuation techniques utilized to determine such values:



	June 28, 2019
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Cash equivalents:
Money market funds	$	1,388	$	—	$	—	$	1,388
Certificates of deposit	—		17		—		17
Total cash equivalents	1,388		17		—		1,405
Foreign exchange contracts	—		44		—		44
Interest rate swap contracts	—		2		—		2
Total assets at fair value	$	1,388	$	63	$	—	$	1,451
Liabilities:
Foreign exchange contracts	$	—	$	40	$	—	$	40
Interest rate swap contract	—		65		—		65
Total liabilities at fair value	$	—	$	105	$	—	$	105



	June 29, 2018
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Cash equivalents:
Money market funds	$	2,554	$	—	$	—	$	2,554
Certificates of deposit	—		4		—		4
Total cash equivalents	2,554		4		—		2,558
Short-term available-for-sale securities:
U.S. Treasury securities	3		—		—		3
Corporate notes and bonds	—		12		—		12
Asset-backed securities	—		4		—		4
Municipal notes and bonds	—		2		—		2
Equity securities	2		—		—		2
Total short-term available-for-sale securities	5		18		—		23
Long-term available-for-sale securities:
U.S. Treasury securities	3		—		—		3
U.S. Government agency securities	—		5		—		5
International government securities	—		1		—		1
Corporate notes and bonds	—		65		—		65
Asset-backed securities	—		8		—		8
Municipal notes and bonds	—		11		—		11
Total long-term available-for-sale securities	3		90		—		93
Foreign exchange contracts	—		51		—		51
Interest rate swap contracts	—		16		—		16
Total assets at fair value	$	2,562	$	179	$	—	$	2,741
Liabilities:
Foreign exchange contracts	$	—	$	28	$	—	$	28

Money Market Funds. The Company’s money market funds are funds that invest in U.S. Treasury and U.S. Government agency securities. Money market funds are valued based on quoted market prices.

Certificates of Deposit. The Company’s certificates of deposit are investments which are held in custody by a third party. Certificates of deposit are valued using fixed interest rates.

Foreign Exchange Contracts. The Company’s foreign exchange contracts are short-term contracts to hedge the Company’s foreign currency risk. Foreign exchange contracts are valued using an income approach that is based on a present value of future cash flows model. The market-based observable inputs for the model include forward rates and credit default swap rates. For more information on the Company’s foreign exchange contracts, see Note 5, Derivative Instruments and Hedging Activities. Derivative assets and liabilities are reflected in the Company’s Consolidated Balance Sheet under Other current assets and Accrued expenses, respectively.

Interest Rate Swaps. The Company’s interest rate swaps are long-term contracts to hedge the Company’s variable rate debt risk. Interest rate swaps are valued based on estimated present value of future cash flows model. The market-based observable inputs for the model include interest rate curves and credit valuation adjustments.

During 2019 and 2018, the Company had no transfers of financial assets and liabilities between levels.

Available-for-Sale Securities

The Company sold substantially all of its available-for-sale securities during fiscal 2019. The cost basis of the Company’s investments classified as available-for-sale securities, individually and in the aggregate, approximated its fair value as of June 29, 2018.

Financial Instruments Not Carried at Fair Value

The carrying value of the Company’s revolving credit facility approximates its fair value given the revolving nature of the balance and the variable market interest rate. For financial instruments where the carrying value (which includes principal adjusted for any unamortized issuance costs, and discounts or premiums) differs from fair value (which is based on quoted market prices), the following table represents the related carrying value and fair value for each of the Company’s outstanding financial instruments. Each of the financial instruments presented below was categorized as Level 2 for all periods presented, based on the frequency of trading immediately prior to the end of the fourth quarter of 2019 and the fourth quarter of 2018, respectively.



	June 28, 2019				June 29, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in millions)
0.50% convertible senior notes due 2020	$	33	$	31	$	31	$	34
Variable interest rate Term Loan A-1 maturing 2023	4,824		4,780		4,982		5,013
Variable interest rate U.S. Term Loan B-4 maturing 2023	2,424		2,370		2,448		2,452
1.50% convertible notes due 2024	958		986		931		1,114
4.750% senior unsecured notes due 2026	2,283		2,263		2,280		2,238
Total	$	10,522	$	10,430	$	10,672	$	10,851

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details